Today, more than two billion people do not have access to safe drinking water. This is a quarter of the world population, illustrating the need for dramatically increased investments in the water sector to achieve availability of water for all by 2030 as stated in the sustainable development goals.
To address the challenge, IFU together with six private and public investors is entering the Water Access Acceleration Fund (W2AF), which is the first private equity fund in a sector that is traditionally financed by governments, donors and foundation. The blended fund aims to provide 20 billion liters of water to 30 million people, mainly in Africa and Asia.
The societal gains are evident as every USD 1 invested in basic drinking water gives USD 3 in returns. The figures are even higher for water investments in rural areas.
W2AF will invest in innovative water businesses that provide affordable and safe drinking water to underserved populations. Besides creating positive financial and social impacts, the fund aims to demonstrate the financial viability of the safe drinking water market worldwide.
“Lack of access to clean drinking water has profound consequences for billions of people in emerging economies, and we are far away from meeting the SDG 6 target on creating access to safe water for all. W2AF is an innovative tool to mobilise the needed private capital, which can speed up investments in private sector water companies and demonstrate that the water sector is financially viable. We are looking forward to being part of this initiative and make a positive impact by providing clean and affordable water to 30 million people.”
Arent Christian Kjær, Investment Director at IFU.
Investments need to increase six-fold
The ambition presented by W2AF is in line with the World Bank that up to this year’s World Water Forum stated that global investment needs in the water sector will increase six-fold from current levels between now and 2030. In Africa alone, the need is around USD 20 billion annually.
Meanwhile, countries in Africa are allocating no more than 0.5% of their GDP to the water sector. Governments alone will not be able to fill the investment gap, and consequently there is a strong need to engage private investors trough blended finance instruments, for example.
“Drinkable water is a luxury we too often take for granted. Yet, 2.2 billion people today do not have access to safely managed drinking water. Meanwhile, there are talented water company owners who know how to solve this problem but can’t find an investor who aligns with their vision to help them scale up. That’s why Incofin created W2AF, to address the growth capital needs of these entrepreneurs, and to prove that the drinking water sector is investment-ready, even when targeting low-income people.”
Dina Pons, Managing Partner Incofin and W2AF Fund Relationship Manager.
EUR 36 million in first closing
IFU has invested EUR 6.8m in W2AF, which reached a total of EUR 36 million in commitments in its first closing. The fund aims at raising a similar amount in subsequent closings. The committed capital comes from a diverse pool of private and public investors, including Danone along with BNP Paribas, the U.S. International Development Finance Corporation (DFC), Norfund, the Danish development finance institution IFU, and international foundation Aqua for All. The U.S. Agency for International Development (USAID) provided catalytic funding to enable a first-loss tranche through the INVEST initiative.